Quiz #1

Question 1

It enhances the value and usefulness of the financial statements.

Answer 1

Auditor’s opinion

Question 2

The primary function of an independent audit is to ________ to the financial statements prepared by an entity.

Answer 2

lend credibility

Question 3

It is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria.

Answer 3

Audit

Question 4

Auditing proceeds by the means of ordered and structures series of steps.

Answer 4

Auditing is a systematic process

Question 5

These are the representations made by an auditee about economic actions and events.

Answer 5

Assertions

Question 6

The auditor should conduct the audit without bias.

Answer 6

An audit is conducted objectively.

Question 7

An asset or liability exists at a given date.

Answer 7

Existence

Question 8

An asset or a liability pertains to the entity at a given date.

Answer 8

Rights and obligations

Question 9

A transaction or event took place which pertains to the entity during the period.

Answer 9

Occurrence

Question 10

There are no unrecorded assets, liabilities, transactions, or events, or undisclosed items.

Answer 10

Completeness

Question 11

An asset or liability is recorded at an appropriate carrying value.

Answer 11

Valuation

Question 12

A transaction or event is recorded at the proper amount and revenue or expense is allocated to the proper period.

Answer 12

Measurement

Question 13

An item is disclosed, classified, and described in accordance with the applicable financial reporting framework.

Answer 13

Presentation and disclosure.

Question 14

It involves examining records or documents, whether internal or external, in paper form, electronic form, or other media, or a physical examination of an asset.

Answer 14

Inspection

Question 15

It consists of looking at a process or procedure being performed by others.

Answer 15

Observation

Question 16

It represents audit evidence obtained by the auditor as a direct written response to the auditor from a 3rd party (the confirming party), in paper form, electronic or other medium.

Answer 16

External Confirmation

Question 17

It consists of checking the mathematical accuracy of documents or records.

Answer 17

Recalculation

Question 18

It involves the auditor’s independent execution of procedures or controls that were originally performed as part of the entity’s internal control.

Answer 18

Reperformance

Question 19

It consists of evaluations of financial informations made by study of plausible relationship among both financial and non-financial data.

Answer 19

Analytical Procedures

Question 20

It also encompass the investigation of identified fluctuations and relationships that are inconsistent with other relevant information or deviate significantly from predicted amounts.

Answer 20

Analytical Procedures

Question 21

It consists of seeking information of knowledgeable persons, both financial and nonfinancial, within or outside the entity. It is used extensively throughout the audit in addition to other audit procedures.

Answer 21

Inquiry

Question 22

3 Types of Audits

Answer 22

1. Financial Statement Audit
2. Compliance Audit
3. Operational Audit

Question 23

This is an audit conducted to determine whether the financial statements of an entity are fairly presented in accordance with an identified financial reporting framework.

Answer 23

Financial Statement Audit

Question 24

It involves a review of an organization’s procedures to determine whether the organization has adhered to specific procedures, rules or regulations.

Answer 24

Compliance Audit

Question 25

It is a study of a specific unit of an organization for the purpose of measuring its performance. The main objective of this type of audit is to assess entity’s performance, identify areas for improvements, and make recommendations to improve performance.

Answer 25

Operational Audit

Question 26

These are independent CPAs who offer their professional services to different clients on a contractual basis. External auditors are the ones who generally perform financial statements.

Answer 26

External Auditors

Question 27

They are entity’s own employees who investigate and appraise the effectiveness and efficiency of operations and internal controls. Their main function is to assist the members of the organization in the effective discharge of their responsibilities.

Answer 27

Internal Auditors

Question 28

They usually perform operational audits.

Answer 28

Internal Auditors

Question 29

These are government employees whose main concern is to determine whether persons or entities comply with government laws and regulations.

Answer 29

Government Auditors

Question 30

They usually conduct compliance audits.

Answer 30

Government Auditors

Question 31

The opinion expressed by the auditor when the auditor concludes that the financial statements are prepared, in all materials respects, in accordance with the applicable financial reporting framework.

Answer 31

Unqualified Opinion

Question 32

It is expressed when the auditor concludes that an unqualified opinion cannot be expressed but that the effect of any disagreement with management, or limitation on scope is not so material and pervasive as to require an adverse opinion or a disclaimer of opinion.

Answer 32

Qualified Opinion

Question 33

It is expressed when the effect of disagreement is so material and pervasive to the financial statements that the auditor concludes that a qualification of the report is not adequate to disclose the misleading or incomplete nature of the financial statements.

Answer 33

Adverse Opinion

Question 34

It is expressed when the possible effect of a limitation on scope is so material and pervasive that the auditor has not been bale to obtain sufficient appropriate audit evidence and accordingly is unable yo express an opinion on the financial statements.

Answer 34

Disclaimer of Opinion

Question 35

For practical reasons, auditors do not examine all evidence available. Many audit conclusions are made by examining only same of evidence.

Answer 35

The use of testing/sampling risk

Question 36

It involves the application of audit procedures to less than 100% of items within an account balance or class of transactions such that all sampling units have a chance of selection.

Answer 36

Audit sampling

Question 37

The work undertaken by the auditor to form an opinion is permeated by judgment.

Answer 37

Error in application of judgment/non-sampling risk

Question 38

Some evidence supporting the financial statements must be obtained by obtaining oral or written representations from management.

Answer 38

Reliance on management’s representation

Question 39

It consists of all the policies and procedures adopted by the management of an entity to assist in achieving management’s objective of ensuring.

Answer 39

Internal control system

Question 40

Evidence obtained by the auditor does not consist of “hard facts” which prove or disprove the accuracy of the financial statements.

Answer 40

Nature in evidence

Question 41

The reliability of audit evidence is increased when it is obtained from ______ source outside the entity.

Answer 41

independent

Question 42

Users of financial information are usually prevented from directly assessing the reliability of the information.

Answer 42

Remoteness

Question 43

Misleading financial information could have substantial economic consequences for a decision maker.

Answer 43

Financial consequences